“We were frightened of trashing our timesheets. As a general practice working for owner‐managed businesses, everyone in our practice had grown up with them; it was what people in practice did. Over the years, we had developed very good patter explaining how time-cost billing worked, why it was best and — we were very good at this—why fixed prices were bad. I had often told other accountants the single best investment we had made was our time and fees software. We even persuaded certain customers that they needed to record time, otherwise how could they know what the profitable jobs were, and who was and wasn’t pulling their weight?

So when first introduced to Ron Baker, initially by reading his book Professional’s Guide to Value Pricing and shortly afterwards hearing him speak at an event, I was deeply unsettled. He was very persuasive and made sense as he talked and described a world of fixed prices, guarantees and—horror of horrors—no timesheets. I read his book again and had the opportunity to discuss (argue, really) many of the points with him over the next couple of years.  

We didn’t see why we had to adopt everything he advocated. He seemed to be right about fixing prices in advance.  We had long noticed customers’ resentment to the blank check approach of professional pricing, and started to introduce fixed prices and adapted his example Fixed Price Agreement (FPA). However, we still had timesheets, and so could track the success of this experiment. It took us time to even try FPAs, initially just using them on new customers or on one--‐off assignments. But once we committed to having them firm-wide, we had all but a handful of customers on them within a year. The overwhelming majority welcomed fixed prices for agreed assignments—and turnaround times. 

We had been using FPAs for around 18 months before we decided to discard timesheets. We had some successes but several failures—or losses—on jobs with FPAs. Being accountants and never wanting to take a loss on anything, we, of course, scrutinized the losses. We found three causes:

• Outrageous optimism/myopia on our part.
• Not holding clients to what they said they would do.
• Scope creep, being of two types:
  
  1) Misunderstanding the customer expectations of what we were to do and then being made to do it.
  2) Blithely doing more than we contracted to perform.

Of course, the way we recognized our losses (especially the blithe ones) was by looking at our time records and wondering how on earth so much cost was on a job. The big revelation was our abject disappointment that one particular “good job” made a £2,000 loss. Our post-mortem analysis here showed that willful scope creep poured time on to the job needlessly. This extra work did add value to the customer, but we did not capture any of the value created by utilizing “Extra Work Orders,” our name for Change Orders. But even that did not cause the loss, it just stopped us making a profit. The root problem was that a qualified manager did work that a junior could and should have done. Thirty or forty hours were recorded on this job at £96 per hour that should have been less.

The whole “loss” was spurious. We made money on the job—of course we did—but the timesheets led us to believe otherwise. Holding on to timesheets after introducing FPAs had led us to recognize scope creep—albeit after the fact—and to be attentive to customers’ expectations and their obligations to provide us with information. But it finally dawned on us that all of those things should be dealt with before the work was done. Timesheets were a crutch, but one that was holding us back. We understood we should price independently of timesheets.

What surprised us was that timesheets did not help us with our profit forecasting or profit recognition. Maybe we were too analytical about this, but once FPAs were in place firm‐wide we realized just how inadequate a measure of value timesheets were. They were also inadequate measures of costs. Professional firms have fixed costs. Our task is to consider how to allocate the resources bought by those fixed costs. The introduction of FPAs taught us how to discuss value with customers for a given outcome. We recognized that it was our task to design the cost structure to meet the price—the opposite of the “blank check” approach of hitherto.

The last possible reason for holding on to timesheets was for work‐in-progress valuation. Timesheets and time recording had given us something to fix on as the amount of value created in a given period, be it a day or a year. They gave a way of assessing work‐in‐progress at the month end, which we then adjusted for known write-downs (never write-ups, of course; timesheets don’t help capture the extra value you create). We realized that we had to talk with our team as to what work was going to be done, by whom, and when we could expect to complete it—in other words, proper project management.

So our firm decided to track the following Key Predictive Indicators (KPIs):

• Value expected to be created in the month;
• Total FPAs at start and end of month;
• Average turnaround time of jobs.

Now we do the timesheets in advance. We learned from experience and mistakes somewhat slowly, but now are so confident that we can plan our work and capacity sufficiently in advance, that we could abandon timesheets. In effect, we complete the timesheet before we do the work, and then use the turnaround Time KPI to track— on a real‐time and leading basis—our firm’s velocity. Thus we became a firm of accountants not using timesheets for pricing, nor for project or team evaluation (not that we ever did, but we always thought we could). We are now in a position where “no timesheets” attracts customers and prospective recruits, and the partners, team members, and bank manager love it. Our customers welcomed fixed prices so much that we arranged the payment terms so that we are paid almost entirely in advance.

I have yet to meet a professional who likes completing their timesheet. And since no customer buys time, and does not measure the success of their professional based on time, why do we all continue to hold onto a practice that is not relevant to our success—and injurious to our relationships with our customers? We could not be sure, in advance, that we were right to abandon timesheets, so to some extent we took a leap of faith. Not a very big leap, because we could always bring them back, but it was uncomfortable abandoning something everyone else was doing. Now we scoff at timesheet‐padding scandals, we tell customers and referral sources that we don’t do timesheets, and we certainly tell recruitment agents and potential recruits

We love not having timesheets and will never look back!”

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